A reasonable time period for paying a dividend is one-two weeks.
The payment can be initiated immediately after adoption of the shareholder resolution. Typical processing time at the respective bank should be considered.
The shareholder resolution may also provide for a specific payment date in the future. The bank would then be instructed accordingly.
There are below listed timing restrictions on paying dividends.
Annual dividend:
Shareholder resolution on approval of annual accounts and appropriation of profits shall be adopted
- within the first eight months of the following financial year in case of medium-sized and large-sized companies
- within the first 11 months of the following financial year in case of small-sized companies
The approval of the annual accounts is often combined with the shareholder resolution on the appropriation of profits.
Shareholder resolution on appropriation of profits may be amended later on by another (unanimous) shareholder resolution.
Interim dividend:
Availability of interim accounts.
The accounts required to support payment of a dividend are as follows:
Annual dividend:
Accounts must be annual, individual company accounts (not consolidated) and prepared in accordance with German generally accepted accounting principles (GAAP). Audit requirement for the annual accounts depends on the size of the company.
Interim dividend:
Accounts must be interim, individual company accounts (not consolidated) and prepared in accordance with German GAAP. No audit requirement.
Yes, there are restrictions on the amount of dividends that can be paid.
The Company's articles of association may contain restrictions and will need to be checked.
The equity capital (from a German GAAP perspective), after the dividend distribution, must still cover the registered share capital.
The company must not become illiquid as a result of the dividend distribution.
At the moment of the dividend distribution and by applying the standard of care of a prudent businessman, the company is also not dependent on the distributed funds to pay its pending liabilities.
Interim dividend:
In addition to the above-mentioned restrictions, it needs to be checked whether the estimated profits that will be distributed will be available as year-end profit.
Yes, it is possible to increase reserves.
Reserves can be increased by a shareholder's contribution or on the basis of a shareholders'' resolution resolving to allocate the annual surplus to the reserves of the Company.
No regulatory approvals are required in connection with payment of a dividend.
However, certain reporting obligations may exist. Cross-border payments in excess of EUR 12,500 and any receivables or debts or payables in foreign currency exceeding an amount of EUR 5,000,000 must generally be reported to the German Central Bank on a monthly basis.
No, there are currently no foreign currency restrictions in Germany.
However, certain reporting obligations may exist. Cross-border payments in excess of EUR 12,500 and any receivables or debts or payables in foreign currency exceeding an amount of EUR 5,000,000 must generally be reported to the German Central Bank on a monthly basis.
No, generally not.
However, there might be situations where a work council needs to be involved. For example, in case of a distribution in kind by way of transfer of shares in a German subsidiary, the economic committee (or if such committee does not exist, the works council) must be informed about the envisaged share transfer.
For intragroup lending, there are no banking license requirements.
Certain reporting obligations may exist. Cross-border payments in excess of EUR 12,500 and any receivables or debts or payables in foreign currency exceeding an amount of EUR 5,000,000 must generally be reported to the German Central Bank on a monthly basis.
As regards reporting requirements to the German central bank "Bundesbank" for cross-border payments, short term loans and loan repayments (up to 12 months maturity) are exempt from the above stated reporting requirement. Please note that this exemption does not apply to interest payments or to the making or repayment of loans with a maturity of more than 12 months.
Note that debt or receivables that residents have towards non-residents including affiliated companies which exceed EUR 5,000,000 need to reported to Deutsche Bundesbank on a monthly basis.
Loans shall meet arm's length principle.